Companies in North America (N.A.) and Asia Pacific (APAC) are expecting airfare and lodging rates to climb next year and bracing for these increases by upping their travel budgets, travel managers report. Negotiations with airline and hotel suppliers for 2012 were also tougher this year – with buyers citing stricter volume commitments and expecting less generous discounts, according to a recent survey of North American and Asia-Pacific based travel buyers by the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA).
Highlights from the GBTA Annual Industry Pulse Report include:
* With the exception of domestic car rentals, buyers expect average airfares and hotel rates in North America to rise between 3% and 5% in 2012. Buyers expect average rates/fares to rise between 4% and 6% in Asia Pacific.
* Buyers expect domestic airfares to increase the most in 2012:
* North America – 5% projected increase to average fare of $487
* APAC – 5.3% projected increase to average fare of $412
Buyers also expect fares to rise in other airfare categories:
* International economy – N.A: 4.4% to $1,193; APAC: 5.1% to $1,146
* International business class – N.A.: 3.9% to $4,929; APAC: 4.6% to $3,535
* Projected increases for domestic hotels (N.A: 4.1% to $165; APAC: 4.9% to $181) and international hotels (N.A: 3.3% to $262; APAC: 4.4% to $618) are not far behind.
* In both regions, higher travel rates (N.A: 69%; APAC: 52%) and airline fees (N.A: 58%; APAC: 53%) were most often cited as the primary factors driving increases in travel budgets.
* More than half of buyers in North America (53%) said terms for 2012 were stricter relative to volume and market share thresholds from airlines. Somewhat fewer than half of respondents (45%) felt this way in APAC.
* A substantial majority of buyers said the discounts yielded in negotiations are expected to be the same or worse in 2012 from airlines (N.A.: 74%; APAC: 77%) and hotels (N.A.: 88%; APAC: 76%).
* International travel is a major force behind increases in travel spend because international trips typically cost more. Buyers projected international spend would comprise a healthy portion of total travel spend in 2012—32% and 54% respectively for North America and Asia Pacific.
“Companies are attuned to the importance of travel and boosting their budgets in the face of higher rates so they can keep their people on the road. Critically, travel buyers recognize that as rates climb, the best defense is a good offense. Buyers are working to identify savings and protect their budgets through strong travel policies and strategic negotiations with suppliers heading into 2012.” said Jim McMullan, GBTA president and CEO.
When it comes to the state of the economy compared to last year, travel buyers in these regions are seeing uneven levels of recovery. For North America, travel buyers have mixed feelings on the economy: 25% feel it’s doing better, 47% feel it’s the same, and 28% say its worse. There is still positive sentiment as 90% believe the economy will not get worse over the coming year.
In contrast, buyers in Asia Pacific are generally more positive about their current conditions with 42% indicating the economy is better and only 18% saying its worse.